Interview: Finance Secretary Derek Mackay on his budget and reputation
Can Derek Mackay get the most important Budget in Holyrood history over the line or will the SNP’s opponents force him to drop the ball?
Derek Mackay: Picture credit - David Anderson
Nicola Sturgeon is notorious for her preparation and political calculation – so when it came to sizing up her Finance Secretary ahead of the most important Budget in Holyrood’s history she was taking no chances.
Speculation was rife at the SNP autumn conference of a Scottish cabinet reshuffle, following the snap general election three months earlier which sent several veteran nationalists packing but also cost Theresa May her majority.
May’s year went from bad to worse when an unfortunate coughing fit at her own party conference reduced her to a laughing stock, and Sturgeon couldn’t resist having a chuckle herself a few days later.
“I’ve come prepared,” Sturgeon told the SNP members gathered in Glasgow in October as she held up a box of Strepsils.
“Derek, look after these for me,” she said, tossing the box across the stage into the waiting arms of her Finance Secretary.
“I told you he was a safe pair of hands,” she joked as Mackay caught the box.
It was a moment of apparently spontaneous merriment which, like most of the First Minister’s moves, was well rehearsed in advance.
“She did tell me she was going to do it before her speech,” says Mackay, spotting a packet of Strepsils as Holyrood arrives to grill him on his forthcoming Budget negotiations.
“She threw them at me at the end of her dry run, to make sure I caught them – and just as well I did,” he added, without volunteering the consequences of fumbling the First Minister’s lozenges.
Now there is a bigger package in the air – a £33bn budget which Mackay has yet to get over the line as he’s locked in a political scrum with a numerical disadvantage.
As Finance Secretary in a minority government, he needs the support of at least one other party.
All eyes are on the Greens who have similar nationalist progressive credentials but have their own ideas about whose pockets to pick and where to put the money.
We’ve been here before, in 2009 when two Green MSPs tried to topple the Budget over a home insulation project, forcing Alex Salmond to threaten a snap election to bring the other parties into line.
Green leader Patrick Harvie said he has no desire for a repeat performance, but warned concessions must be made to secure his party’s support including more funding for councils.
“If any party plays silly games with the Budget I don’t think they will be rewarded by the public,” says Mackay, in his favourite Atlantic Quay office overlooking the Clyde.
“In such a period of uncertainty, with economic and political turbulence across the globe and in the UK, I think the public out there expect us to deliver economic stimulus, quality public services and also a degree of stability.
“I think it would be very hard for any serious progressive party in this parliament to vote this Budget down.
“I give credit to the Greens, they engage constructively and with a degree of clarity. I’m not sure I can say the same of the others.
“I have to scenario plan, of course, but I am not speculating on the Budget being defeated.
“There are options short of an election, such as continuing with the previous year’s Budget, but why would a progressive opposition party revert to a previous year’s Budget when I think we’ve made more progress on productivity, investment, public sector pay and in supporting public service transformation and investment?
“I’m sure that people will engage constructively, because I don’t think the alternatives would be welcomed by the public.”
Mackay has given up trying to win over the Conservatives, as they fundamentally oppose any taxation that diverges from the UK and this is exactly the course Mackay has set for Scotland.
An innovative five band income tax system will see higher earners pay more than elsewhere in the UK – and lower earners pay less.
Labour remains an unknown quantity, nearly two months after their fourth leadership election in six years, which has realigned the party from the centrist position of Blair’s heirs to the left-leaning policies of Corbyn’s comrades.
“Labour seems to be in an irresponsibly ranty mode,” says Mackay.
“During the Budget debate, I actually had to ask the Labour leader who his finance spokesman was – and it was remarkable that I didn’t know.
“Richard Leonard has appointed James Kelly as finance spokesman, so I think that is who I will be dealing with going forward, and possibly even Richard too.
“I will always respect the confidence of the negotiations with other political parties, and I will deal with any delegation that the parties choose to send.
“Kezia was the finance spokesperson for Labour, as well as being the leader, but I haven’t had enough time with Richard Leonard to see how he will operate in relation to the Budget.
“Obviously, you will hear leaders and spokespeople set out their position publicly in parliament and in the press, but privately, you have more constructive engagement to find the compromise.
“They can hold true to their principles but if everyone just stays to their partisan position there can be no progress.
“We have to find consensus when it comes to the Budget so it remains to be seen whether Richard Leonard can move from bombastic bluster – which may well be principled – to compromise and constructive engagement.
“In a parliament of minorities, we all need to mature and we all need to understand that there has to be compromise.
“I believe the government has shown that it is able to do that, to find a consensus to reach a deal, but there is a question over the others.
“The Tories have said they don’t want any tax divergence from the UK. OK, that is their principle, and that’s fine, but the truth of that also means brutal cuts to achieve that and less quality public services, less support, less mitigation of UK reform and not having the best deal in the UK.
“I know what their position is – it’s lower tax. That’s objectionable to me because it means lower public services and a different kind of country.
“Labour’s current position is every penny has to go to local government with a substantial increase, but what about the NHS? Why is the NHS the poor relation in Labour’s public service hierarchy?
“So far, I haven’t seen any sign that Labour is willing to compromise which has put them in the same boat as the Tories, which is opposition for opposition’s sake.”
Divergence is the keyword of this Budget. It was, after all, the point of devolution with Holyrood’s tax-varying powers democratically approved at the parliament’s foundation but never used until they were shored up by the Smith Commission nearly two decades later.
However, with the Conservatives on a winning streak as the ‘defenders of the Union’, they sense that any divergence will ultimately sow division, so their new-found zeal for devolution in the final days of the independence referendum has reversed.
“This Budget is a point of serious divergence from a Brexit-mad, right wing UK Government,” says Mackay.
“There is a clear difference between the Chancellor’s Budget and our Budget so I think it would be very hard for the progressive opposition parties to vote it down.
“I don’t hold out any hope that the Tories will vote for this Budget, but if I was to vote for their tax plans as well as the real-terms cut that the Chancellor has handed down to Scotland, I would have to cut public services by a further £501 million if I was to deliver on their tax reductions on income tax, LBTT and council tax.
“I think the Tories are a lost hope, they won’t vote for the Budget and I know it.”
Mackay says the new tax powers bestowed on Holyrood by the Smith Commission was “a learning curve for everyone” – and he’s not convinced all the players have quite found their feet yet.
He’s not convinced too that the Scottish Fiscal Commission (SFC), the public body tasked with producing independent forecasts of Scotland’s economy to inform the Budget, has got its sums right with its conservative tax projections and rather dismal prediction of just 0.7 per cent growth over the next four years.
“Some people have suggested that the SFC’s forecasts are too cautious and too conservative,” says Mackay.
“If you look at the SFC’s report on tax projections compared to, say, our discussion paper on the role of income tax on Scotland’s Budget, again, their forecasts were a bit more cautious.
“They are, of course, a relatively new organisation and they want to try and get it right, and be accurate, absolutely, but some have suggested they may have been a bit too conservative.
“Our modelling suggests we may raise more through income tax. I think that we will be able to grow our economy, and that our tax policies may be able to raise more.
“We published a low, middle and high range of what income tax could raise, and the SFC forecasts were at the lower end of our range.
“I am simply saying if you take a slightly more generous view, we may raise more through income tax.”
He rejects the claims of the opposition and some experts that Scotland’s economy is faltering.
“It’s in growth, it’s positive, it’s not in recession,” he insists. “How many times have we heard about a ‘Scotland-only recession’?
“There is no prospect of that happening. It is growth, but yes, it is subdued and it is at risk in terms of the Scottish economy – like the rest of the UK economy – because of Brexit and that is why there has been a downgrade in the OBR forecast and in turn, the SFC forecast.
“They use different methodologies from others. EY’s forecasts were far more positive for Scotland’s economy, but we are bound by the SFC’s forecasts and of course, economists will give me a range.
“It is subdued so there is work to be done, and that is all the more reason to invest in things like industry, innovation, skills and put ourselves in the best possible position to have a positive story on migration which is the single biggest challenge to our economic success story – retaining people here, attracting new people and having people with the right skills and of course, Brexit is a fundamental challenge to that.”
While Brexit is undoubtedly a source of uncertainty, probably the biggest challenge for Scotland’s economy was built into the system long before the European Union was devised – a sizeable population of baby-boomers who are approaching pension age and will put a greater strain on the public finances.
“There is a demographic challenge, but I would object to the terminology that it is ‘a burden’,” he says.
“It’s not a burden. People have paid into the system and they should get back what they are due.
“I also believe in a safety net. That means a strong NHS, a strong pension system, strong social security support.
“It’s not a burden, but what it has done is raise expectations in our public services because of the way our population is changing. The demand on those services will change and we need to adapt to that.
“Winter is a time when there is more pressure on the NHS, for example.
“How do we change? We have more investment in health, we have more investment in the transformation of our public services, including in the NHS and in part from the shift from acute to community healthcare and more appropriate support and solution, whether that is the local pharmacy or other groups, and preventative behaviour as well.”
Mackay, who was appointed leader of Renfrewshire Council at the age of just 21, still sees himself as a constituency politician first-and-foremost, although he admits more people are now asking him about tax at his surgeries than ever before.
“I started off local and I will remain local,” says the Renfrewshire North and West MSP, whose constituency includes parts of Paisley which recently lost out on the title of City of Culture 2021 to Coventry.
“In truth, I was a cynic at the start,” admits Mackay. “I thought, maybe it can’t win this UK Government-led bid, how can it win when it’s a town and not a city?
“But my initial cynicism only lasted five minutes, and for the last couple of years that the campaign has been under way, I have been a total supporter.
“Whether Paisley won or not, what it has achieved is a new sense of pride in the town and that is something that money can’t buy. Paisley has now turned a corner.
“I was leader of the council for four years, chair of the Vision Board, and I started a lot of projects and big events in the town like the museum project, retail support schemes, but I never managed to crack that issue about restoring pride in the town.
“It was this culture bid that has largely achieved that, and that is a wonderful outcome. People were heartbroken on the night, but it has been a source of pride that people thought they could do it.
“Some folk in Paisley would have said it’s a waste of time, but nobody says that now.
“Some people described Paisley as the posterboy for town-centre decline, but I don’t think it will be remembered for that anymore. I think it will be remembered for its cultural aspirations now.
“I’m very enthused by what I have seen, and I am happy to support Paisley – including as Finance Secretary.”
As someone who has been touted as a possible future SNP leader, Mackay insists he is a man of relatively modest goals.
He said he “loved being a council leader” and believes he has secured his “dream job” as “arguably the most empowered finance secretary that a devolved Scotland has ever had”.
“What a time to be doing the job, it is great,” he says.
“And I’ll tell you this, I don’t think the First Minister is going anywhere anytime soon. I think she is going to be our leader for some time.”
He has also had a taste of some of the unpleasant attention a higher profile can bring, and says he’s sceptical about reaching any higher.
He has been the target of homophobic abuse since 2013 when he revealed that he had left his wife – the mother of his two children – and publicly declared that he is gay.
“Politicians are human as well, and I’m as sensitive as anyone to personal remarks,” he says.
“Political discourse is fine. I’m open to criticism of policy or delivery or new ideas, with argument and engagement, but personal abuse should have no place in politics so I mute it [on Twitter] whenever I can.
“There are many people muted that think they are abusing me every day, but they’re not. It kind of pleases me to know that they are shouting into space.”
He added: “I had a turbulent time, but as the years have gone on, I feel far more comfortable and confident personally about the issues around sexuality.
“I’m always really protective of my two boys, and some people don’t even realise I have children because I am very protective of them, but I’m very pleased that they have never had any hassle or trouble as a consequence of me coming out.
“They have probably had more attention because of my job, than anything else, but in a good way.
“I feel more confident, happier, true to myself, and I think when you have that sense of wellbeing, you probably do your job better as well. So, I feel in a pretty good place.
“Despite being protective of my boys, I like to think I have made them proud, and they have told me that I have.
“It’s all good.”
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